Consumer confidence and spending intentions lift    

Weekly consumer confidence; CBA Household Spending Intentions & card spending

• The ANZ-Roy Morgan consumer confidence index rose by 1.3 per cent to 94.6 in the past week.
• Commonwealth Bank (CBA) economists reported the Household Spending Intentions (HSI) index rose by 9.2 per cent in March to a record high of 117.1, led higher by gains for transport, travel, retail and household services.
• The CBA’s latest credit and debit card spending data showed increased spending in all regions for the week ending April 8, signalling continuing strength in the household sector despite higher Covid-19 case numbers.

What does it all mean?

• The latest survey from ANZ and Roy Morgan shows that consumer confidence improved for second successive week, up by 1.3 per cent to 94.6 points. But the number of pessimists still outweighs the number of optimists, with the index below the 100-point neutral mark.
• ANZ economists reported that confidence rose most in Western Australia (up 10.4 per cent) and NSW (up 6.1 per cent) in the past week. But sentiment fell in South Australia (down 10.7 per cent), Victoria (down 1.3 per cent) and Queensland (down 0.2 per cent).
• All five ANZ-Roy Morgan consumer confidence sub-indexes lifted last week, led by a pick up in consumer views on ‘future economic conditions’ (up 1.8 per cent) and ‘current financial conditions’ (up 1.1 per cent). And household views on whether it is a good ‘time to buy a household item’ lifted by 1.6 per cent.
• Yesterday, the Australian Institute of Petroleum (AIP) said that national average retail unleaded petrol price fell by a record 19.1 cents to 174.3 cents a litre last week. The big drop in international crude oil prices was the biggest factor behind the fall in pump prices. And the East Coast retail petrol price discounting cycle combined with the fall in excise fuel tax announced in the budget, were also likely contributors to falling fuel costs.
• Unleaded pump prices are down 38.2 cents from record highs of 212.5 cents a litre in the week ended March 20. In response, ANZ and Roy Morgan’s measure of consumer inflation expectations over the next two years fell from a 9½-year high of 6.4 per cent in the week ended March 27 to 5.8 per cent in the week ended April 3.
• Household inflation expectations were unchanged last week, despite the continued fall in petrol prices, with perhaps consumers becoming more aware of rising food prices after the UN FAO Food Price Index hit a record high in February. Food prices have been driven up by natural disasters, low supplies, the Ukraine war and rising shipping costs. Prices have increased most for vegetable oil, dairy, cereals and meat.
• Despite this, Aussie household spending is still being supported by a strong labour market and excess savings amassed during the pandemic. According to APRA, deposits from households increased by $6.1 billion in February (latest data) to a record $1,243.9 billion, up by 11.6 per cent on a year ago. Households have accumulated $254.7 billion worth of savings during the pandemic (since February 2020).
• The federal government also announced $39 billion worth of additional spending measures in the March 29 budget, with policies targeting rising household cost of living pressures.
• The Commonwealth Bank’s (CBA) household credit and debit card data for the week ending April 8 shows that spending rose in the past fortnight, with all regions recording gains, despite higher Covid-19 case numbers. And in another positive sign for retailers ahead of the Easter holidays, the CBA’s latest Household Spending Intentions (HSI) Index hit a record high in March, led by gains in transport, travel, retail and household services.
• While spending remains robust, a recent survey by the Australian Bureau of Statistics (ABS) shows that 59 per cent of retail businesses expect to increase the prices of their goods and services over the next three months, amid rising fuel costs, staff shortages and supply chain bottlenecks.

What do you need to know?

Consumer sentiment – Week ended April 10

• The weekly ANZ-Roy Morgan consumer confidence index rose by 1.3 per cent to 94.6 (long-run average since 1990 is 112.4).
• All five major sub-components rose last week.

The Commonwealth Bank (CBA) Household Spending Intentions Series (HSI) – March

• Commonwealth Bank (CBA) economists reported the Household Spending Intentions (HSI) index rose by 9.2 per cent in March to a record high of 117.1, led higher by gains for transport, travel, retail and household services.
• The highlights of the March HSI include:
  • “The Transport index is up a very strong 31.8 per cent in March and is now 9.4 per cent higher than March last year.
  • The Travel index rose a strong 18 per cent in March and is up a very strong 43.7 per cent compared to March 2021.
  • The Retail index rose 12.9 per cent in March, recovering some of the lost ground of January and February on a seasonal improvement.
  • The Household services index was up a solid 10.8 per cent in March and is now 12 per cent higher on the year.”

Commonwealth Bank (CBA) card spending – Week ended April 8

• According to CBA economists, “CBA’s internal household spending card data for the week ending 8 April signals continuing strength in the household sector. In the fortnight to 8 April, spending growth in all states rose indicating that higher COVID caseloads have not materially dampened overall spending. In the fortnight, South Australia recorded the strongest pick‑up with all other states also showing spending has significant momentum.”
• And, “Nationally by industry, spending growth on transport fell in the week to 8 April, coinciding with the cut in the fuel excise announced in the Federal Budget. Education spending surged though it is dependent on the timing of university fee due dates, making it volatile. Spending on clothing and footwear continues to be elevated. Recreation remains strong though it has levelled off at elevated levels after recent momentum. Dining and drinking out edged lower though remain at elevated levels, and online spending has been stronger than in‑store over the last month with COVID case numbers at relatively high levels nationwide.”